How innovation can
revitalize the growth
engine of a design firm
through a culture of
intrapreneurship
THE INNOVATION INITIATIVES AND RELATED GROWTH STRARTEGIES
FILIPPO LODIMaster in Business Administration Academic Year 2015-2016
Supervisor - Peter van der Fluit FILIPPO LODI - 10891994
Abstract / Executive Summary
The entrepreneurial society, envisioned by Drucker in the 1980s, is today’s reality. New motives, opportunities and means are the new preconditions of the entrepreneurial society to succeed. This research is an opportunity motivated by personal experience of the innovation engine of UNStudio, the Knowledge Platforms, to search for new means of growth.An analytical approach has been dissecting the operation of UNStudio and its Innovation Initiatives throughout a set of frameworks in order to set up a strategy to revitalize the innovation engine of the company in relation to UNStudio wishes and directions.
Innovation happens everywhere on the business model canvas. As, disruptions occur in every industry, it is imperative to evolve to adapt to these changes and the incumbent disrupt or be disrupted mindset.
Most of the literature reviewed creates a model of understanding that juxtaposes viewpoints: validity and reliability, exploration and exploitation. Ambidexterity is key to coping with innovation. Research and literature have analyzed hundreds of companies facing the innovator’s dilemma, and as a result devised frameworks to cope with the change. The problematic and critical situation is found in the transformation from exploration to exploitation, from Incubation Zone to Productivity Zone. The frameworks of the Three Horizon and the Four Zones devices are key to unlocking this problematic situation and helped devise an overarching strategy of offense and create a system to deal with the Knowledge Platforms and other future innovation initiatives.
Summary
Abstract / Executive Summary 2 Acknowledgements 4 Intro 5 Case Description 6 Literature Review/Underlying Theory 8 Intrapreneurship 8 Innovation 10 Strategy Frameworks 11 The Framework/Tool (plus application) 16 UNStudio 16 Knowledge Platforms 16 Research methodology 18 STEP 1 – why? 19 DRIFT 19 A growth analysis 19An analysis of the architectural industry - WA100 21
The Ten Types of Innovation 28
An analysis of UNStudio through the Ten Types of Innovation 30
An analysis of UNStudio Business Units 34
Three Horizons Framework 34
The Four Zones framework 37
Implications/Managerial Recommendations 42
Step 2 - How ? 42
The New Business Unit Strategy 43
A Change Management Perspective 46
Step 3 - What? 48
A Corporate Entrepreneurship Perspective on the Innovation Initiatives 48
Innovation Initiative Strategy Proposal 50
The Knowledge Platform as Support Function 51
The Knowledge Platform Organization 52
Development of a new MyPlatform 56
Accelerate: Ambidextrous Organization 58
Strategy Recommendation Summary 62
Limitations 65
Appendixes 66
Appendix I - WA100 2016 66
Appendix II – Vertical Integration 68
References 70
Strategy 70
Entrepreneurship, Intrapreneurship and Architecture 71
Innovation 72
Acknowledgements
For this project, I would like to express my large gratitude to my advisor Peter and to UNStudio’s Management team, Ben, Caroline, Gerard, Harm, Astrid, and Ingrid and Machteld for the advice and guidance on this step towards a new journey.
Further gratitude is to the valuable input and knowledge acquired during the MBA courses on Strategy and Innovation from Jeroen, Martyn, and Doron that helped on developing the interests that gave ideas to the project.
My sincere thanks also goes to Marjet and Pam for supporting my regular absence for the last two years of MBA.
Intro
The profession of architecture has shifted radically over the last two decades, as process digitization has introduced new tooling and capabilities that allow architects to express themselves. As society constantly challenges the role of the architect and its relevance, the profession requires constant innovation to cope with a changing world. To reflect the current professional landscape and public mindset, architecture has become more receptive to change, and thus more and more adaptive. Jeffrey Kipnis (Ritter, 2012) argues for a revised attitude towards newness, by putting forward a criteria vers un architecture: “new architecture must continue to avoid the logic of erasure. It must seek to engender heterogeneity that resists settling into fixed hierarchies.”.Along with digitization, a more globalized landscape of work, and innovations in fabrication technologies, sustainable applications and material technologies have changed the business model of architecture. The value proposition changed (from drawing a building to drawing anything: products, cities, interior, research), the unfair advantage changed (advanced technology, 3d computing, scripting are now standards), the customer segments changed (as a result of globalization), the cost model changed (it is difficult to create long-term stability with short-term contracts), the cost revenue changed (not only design fee but licensing and royalties), our key marketing methods changed (the published magazine fades, the blogs iterate the same material, content is now more personal and delivered primarily via social media outlets such as Instagram and Facebook), our customer relationship changed (WebEx, Skype), key resources changed (the industry talks about patents). This massive shift in the industry has revolutionized every aspect of the architecture industry and companies struggle to maintain relevance.
The swift, explosive, unexpected waves of technology that changed the dynamics of work, and consequently the architect’s reality, exemplify disruptive innovation. Disruption is everywhere within the business model canvas and it has become ubiquitous, and imperative for the creation of radical new value. Carlota Perez of the Economist (Perez, 2003) talks about the idea that the last internet bubble
will diverge the global economy into an era similar to Belle Époque, the Post War Golden Age, where broad themes, called Megatrends by TNO, inevitably drive the change in how we see the world. Tesla released a 35K electric vehicle meant to make electric vehicles accessible to the middle segment of the population. This vehicle is set to disrupt the automobile industry in the same way the iPhone has forever altered the mobile phone industry. Companies that do not embrace models of change will slowly disappear, and there are many examples of this, from Nokia to Kodak. The clients of tomorrow are the companies changing today, and Architecture’s ability to change with them, as well as the ability to elucidate that transformation, will enable future survival.
Case Description
The current era’s changes in architecture are rooted in the demand for the type of design firm where innovation is used as an instrument to stay ahead of the curve. UNStudio has always been at the forefront of innovation in architecture. UNStudio stands for United Network Studio. The emphasis on the network comes from the transformation of the role of the architect from the master to the leading figure within a networked group of professionals sharing a collaborative, entrepreneurial attitude.
UNStudio’s adaptability and forward-thinking was evident in the firm’s early adoption of digital computing, and more recently with the creation of the Knowledge Platforms (KPs). The vision of the KPs is to share knowledge and enhance the firm’s core competencies, and to subsequently design and reverberate this information throughout the internet, in academia and the research circuits. By sharing the KPs, UNStudio is able to capture more value as an architecture firm than by designing and building architecture alone. The KPs are meant to operate using the methodologies and the speed of a start-up, pretotyping and prototyping their way up in the company’s ecosystem to improve, transform and cope with the speed of the circular economy. The Knowledge Platforms capture the concepts of knowledge sharing, operating open source, and platform thinking. In essence they capture the idea of newness within the architectural industry. The main role of the Knowledge Platforms as a support
function (a cost center) has been challenged to become more entrepreneurial, and to provide new strategic ideas and create new revenue sources. This challenge has triggered a set of questions within the organization about the development of innovation initiatives and how to transform this innovation culture to accelerate UNStudio’s organic growth. Growth is a prerequisite for sustaining a competitive advantage and a requirement for positioning the firm among those that can work out complex tasks such as designing airports, train stations and the like, The innovation
culture, brought by the Knowledge Platforms and the next generation of Innovation
initiatives, such as Workfields, has triggered an intrepreneurial dynamism. This burst of ideas and viable possibilities could be transformed into growth that could make UNStudio, whose architecture business is advanced and mature, grow faster than its competitors and leap-frog ahead to capture more market value or entirely new markets. As a result of innovation thinking, a culture of intrapreneurship has spread throughout the company. This attitude reflects the speed of innovation and acceleration of ideas characteristic of the start-up world, and questions how these concepts can be applied in a design firm.
This research poses the following question: how can innovation revitalize the
growth engine of a design firm through intrepreneurial thinking?
The innovation engine of UNStudio, the Knowledge Platforms, has been operating for a few years, and their intent and configuration must adapt to the changing landscape of the design industry, as well as the needs of a growing organization and the changes in the organization, as UNStudio leadership prioritizes new initiatives such as Workfields. The architecture of the organization is challenged towards an adaptable model whereby future innovation initiatives can be absorbed in the company dynamics. Moreover, the dynamics of growth in the architecture industry require to competition at the global scale, which enhances the importance of coping with changes in society and industry from a global perspective.
Literature Review/Underlying Theory
Intrapreneurship
Intrapreneurship has been defined (Antoncic and Hisrich, 2001), in a broad sense,
as the creation of value through innovation within an existing organization. The terminology associated with this concept assumes other variations such as corporate entrepreneurship, corporate venturing, internal corporate entrepreneurship, and interpreneuring, while research fundamentally has created a sufficient body of knowledge to investigate its dimension and relationship to corporations. Researchers (Antoncic and Hisrich, 2001) summarize the dimensions throughout which intrapreneurship is seen: new business venturing, innovativeness, self-renewal, and proactiveness. These dimensions much refer to the role of entrepreneurship in an organization in terms of how innovation is a critical dimension for change, which also describes the Schumpeterian definition of innovation.
The figure above displays how intrapreneurship relates to its two main antecedents, environment and organization, and its main consequence, a firm’s performance in terms of growth and profitability.
In the hyper-competitiveness of today’s economy, the path of intrapreneurship has been recognized as a legitimate path to high-level performance, and research (Antoncic and Hisrich, 2001; Covin, Kuratko, and Morris, 2011) has cited its potential
to be a growth strategy. As new models of intrapreneurship are defined (Covin, Kuratko, and Morris, 2011) its manifest into companies is made self-evident, either through corporate venturing or strategic entrepreneurship.
Corporate venturing approaches share a common growth strategy focused on
adding new business, either via organic growth or acquisitive equity investments, while
strategic entrepreneurship approaches share the idea of large scale innovations
throughout the spectrum of the organization and its processes and structure. Irrespective of the direction intrapreneurship takes, its true value lies in the extent to which it helps a firm and an organization create sustainable competitive advantage. This entrepreneurial mindset is in itself a growth strategy that should be cultivated and fostered to ultimately revitalize innovation, creativity and leadership in modern companies.
Sustaining growth is hard (Laurie, Doz, and Sheer, 2006). As businesses become mature, they need to rejuvenate, in order to avoid becoming victims of their own successes. Despite the achieved newness, the desire by senior management of mature companies for more newness is understandable, and oftentimes visible. The change required becomes a hurdle that can be difficult to surmount. Many are the obstacles to change, and there are many obstacles that elicit failure as companies execute increasingly sophisticated innovation strategies.
Growth strategies in architecture are mostly either acquisitive or organic expansions.
UNStudio’s intent is to preserve an organic mode of growth. As this parameter is defined, the speed and incidence of growth relates to the mode of innovation, whether that is seen as sustaining or as disruptive. Sustaining innovation allows for marginal growth, as the changes are incremental, while disruptive innovations are game changers and create jumps ahead. For example, as Apple develops the new IPhone 7 starting from IPhone 6, we talk about incremental innovation. When Apple developed the first generation IPod, it created a disruptive innovation.
Innovation
Much of the recent research (Christensen, Raynor, and McDonald, 2015) has been devoted to this topic, as the notion of disruptive innovation has become ubiquitous. If the early adoption of this concept related to high-growth businesses of the dotcom area, it has been seen recently that almost any industry can be and will be disrupted, and the rate at which disruption is changing the landscape of work environments is almost epidemic. Disruption is about the process (Christensen, Raynor, and McDonald, 2015) and it can take time, thus incumbents frequently overlook
disrupters. As Netflix started operating in the market of video rentals, Blockbuster,
the market leader in that sector, did not see Netflix as a threat because at the beginning they filled different customer needs. Only after the shift of Netflix to stream video content over the internet could it catch Blockbuster’s core customers.
Theory and research on disruptive innovation has evolved since its first appearance (Bower and Christensen, 1995) and gone beyond the simple correlation to a theory of
causation. The rate at which the word “disruption” has been used in academic articles has in fact gone up exponentially, becoming a popular business lexicon. Despite the popularity of the terminology, a lot is still considered unexplored, as the challenges that emerge from those companies that had been once disruptors now are facing disruption themselves. This duality, of being an incumbent and an entrant simultaneously, is still vastly unexplored, posing many questions about the architecture of companies, their strategies and the way they manage to evolve.
Innovation theory (Christensen, 1997) has been arguing for almost two decades about the innovator’s dilemma, whereby companies hinder themselves by their own success and capabilities to face changing markets and technologies. The established networks and organizational structures of mature companies tend to make the processes of change and adaptation arduous and difficult. As discovering new markets involves failure, experimenting, and discovery, most decision makers find it very difficult to risk backing a project that might fail because the market is not there. Much research has been done in the domain of Innovation Management, Corporate Strategy and Entrepreneurship, which has been able to point out the instances of the Innovator’s dilemma, offering solutions and points of view that emerge from analysis of empirical patterns on how the company managed to strategize and execute change effectively and beat the Innovator’s dilemma.
Strategy Frameworks
An interesting approach has been undertaken by describing the innovator’s dilemma in terms of reliability and validity (Martin, 2009), whereby economic value is believed to be found only if an organization shifts from an “obsession with reliability” to a “welcoming environment for validity”. At the intersection of validity and reliability is a
design-thinking approach, a balance between two dominant logics. Reliability is an
easier form to support, as it relies on the numbers, proofing, and certainties and predictable outcomes. Validity is about producing an outcome to delight users, whether they are consistent and predictable or not. A champion of validity, Steve Jobs created a culture to foster validity-oriented arguments and encourage leaps of faith.
This was evident with the iMac, where a dose of initial intuition fostered unprecedented results. Buckminster Fuller is a hero to designers (Martin, 2009), as he was able to be inspired by what most considered intractable physical constrains. For example, whereas scaling up a building intrinsically makes the structure heavier, weaker, and more expensive, he drew a logic whereby a structure could grow lighter, stronger and less expensive as it grows in scale. The translation of this approach to business needs to be defended from the dominant logic of reliability in order to foster a culture of innovation through support and reward.
Research (Foster, Kaplan, 2001) shows, by analyzing the performance of thousands of large firms across four decades, that the company survival rate has been dropping dramatically. In 1935 an average company could expect to spend ninety years in the S&P 500, today an S&P 500 company is being replaced about once every two weeks and this rate is accelerating. Even with the benefit of large size and vast financial and human resources, research (Stubbart and Knight, 2006) shows that the life of an average firm is to be expected to be short. The causes of the inertia that decrease companies’ life expectancy are multiple, but for most the cultural lock-in (Foster, Kaplan, 2001) that develops in companies manifests in secret rules or mental models that once formed are difficult to change. These models are invisible, implicit and not discussed but they are pervasive. When well designed, they allow management to anticipate the future, but as they are in place they become self-reinforcing and limiting, and the assumption of continuity of those models to remain relevant is what leads to mistakes and poor decisions. As research evolves on the cause of these effects it provides models, frameworks, and strategies to guide organizations.
Design thinking has been described as a balance between reliability and validity, and
ambidextrous firms (O’Reilly and Tushman, 2016) balance exploration and exploitation. This very notion of ambidexterity is important not only in regard to the
products a company delivers but also in the spectrum of organizations’ core functions and purpose. Looking at further research on innovation (Keeley et al., 2013) within companies considered top innovators, based on the framework of the 10 types of
product innovation may be one of them. FedEx, for example, has combined five types of innovation: profit model, an automated customer service process, product performance, the best tracking system for customer services, and an innovative channel distribution (by purchasing Kinkos, Inc. to open more FedEx drop-off locations). The balance required between exploration and exploitation is most difficult when companies become mature, whereby an inertia towards exploratory businesses is difficult to undertake, and rational and reliable managers rarely look to entering small, undefined markets. In the examples analyzed in the research (O’Reilly and Tushman, 2016), companies like Amazon, USA Today, and FujiFilm, all faced a mature business situation and excelled in creating strategic insights and executing strategies to overcome extinction. These decisions run contrary to the actions of companies like Kodak, Nokia, and Blockbuster. As the researcher (O’Reilly and Tushman, 2016) remind us, the concepts of exploitation and exploration are relatively simple, but not easy to implement for the managers of those companies. The framework to become an ambidextrous organization requires, according to the researchers, the following four characteristics (though these characteristics alone may not entirely suffice):
- A clear strategic intent
- Senior Management commitment
- Sufficient separation from the exploitative business
- Vision, values, and culture of the exploratory business as a common identity of the organization.
It is defined that a strategic intent has to be clear. Bridging the gap between strategy and execution (Sull, 2007) is about creating an iterative process in which, due to the speed of change, the speed of innovation, or the high-growth rate, an acceleration of the strategic process is required. Therefore, researchers have set up a strategic loop (Sull, 2007) as a process to identify, choose and revise strategy as an operational method. Others (Blank, 2013) have created new methodologies that incorporate a loop of learning, replacing the old regimen, called the lean start-up. This new, important countervailing force has been making the process of launching a company or an initiative within a corporation less risky, as it allows for experimentation over elaborate planning, and iterative design process over creating the “big plan that solves
everything.” The lean start-up (Ries, 2011) methodology is a process of building, measuring and learning, creating an iterative process that culminates with the mantra of “pivot or persevere.” The choice to “pivot or persevere” is based on results of how we measure that portion of the idea, the product, or the process, stressing that the definition of measurement is essential. This process is called validated learning and is based on the idea that we can learn by taking short steps. By taking small steps the impact of our failures will also be small, and the overall risk in starting new ventures is reduced. This approach is important because it allows the company to grow the process and minimize failure, but also allows the company to learn from failures without stopping the process entirely.
The imperative is to accelerate (Kotter, 2012) to cope with the increasing speed of change and counterbalance the increasing rate of “disappearing” companies that become out-Googled. Strategy, in this case (Kotter, 2012), is viewed as a system to constantly seek new opportunities by performing an iterative process of identifying, doing, learning and modifying. This framework proposes to implement a secondary system to complement the old one, so to bring a sort of strategic “fitness,” enabling the new organization to be more fit for the change, more agile, and able to run a dual
operating system. The duality of the approach discussed in this research is not
dissimilar to the organizational design that is proposed (O’Reilly and Tushman, 2016) as the architecture for ambidextrous organizations. In both cases, the emerging business with an explorative focus is positioned independently from the old line of business as a dual engine for growth.
The duality of the approaches analyzed is simplified through a model of thinking that addresses two opposite forces, discarding the transitional situations between two main stages: exploitation and exploration. The Three Horizon Framework (Baghai, Coley, and White, 2000) develops, instead, an analytical method to understand those transitional situations. The transitional situations are of great relevance because therein most of the mistakes and failure occur. The process of scaling is indeed very delicate and creates an enormous relevance in the discourse of growth strategies.
The Three Horizons are explained as such:
- Horizon 1, the exploitation, the core of the business;
- Horizon 2, the transformation, building the momentum for new businesses; - Horizon 3, the exploration, the activities to become.
The relevance of the model in terms of growth initiatives is further explored, by the
Four Zone model (Moore, 216), where the three horizons are placed in a quadrant
perspective and where the Horizon 1 is subdivided into further two Zones by splitting the Profit Centers from the Cost Centers.
The Four Zones are defined as:
- Performance Zone, exploitation, the core businesses, the Profit Centers, Horizon 1 initiatives;
- Productivity Zone, the Cost Centers, Horizon 1;
- Incubation Zone, Exploration, the Horizon 3 initiatives; - Transformation Zone, Horizon 2 Initiatives.
The relevance of using this framework is to capture a clearer picture of the transformational situation that companies need to navigate once they are growing. A second reading of the model regards Innovation and Financial Performance, whereby the Four Zones match to criteria for Sustaining or Disruptive Innovation and for Performance or Investment. The theoretical relevance of the approach relies on the organization’s processes to systematize growth in a fast-paced business environment, whereby as new lines of businesses are added, a crisis of prioritization occurs, triggering a cascade of questions that are alimented by a battle of resources.
The models here describe the essential principles used for the development of the
The Framework/Tool (plus application)
UNStudio
UNStudio is an international design practice. It operates at the global scale and has three geographical branches, with Amsterdam as its headquarters, and Shanghai and Hong Kong as part of UNStudio Asia, culminating in a total workforce of about 200 people. UNStudio works in the fields of architecture, product design, urban design, interior design, and research. Since its founding by Ben van Berkel and Caroline Bos in 1988 as an architectural practice, the firm has built more than 80 buildings and currently has more than 50 projects under design and construction.
UNStudio is short for United Network Studio. As the firm’s emphasis on the network thinking of the office developed, a collaborative practice emerged. During the iteration of the office that followed its beginnings as van Berkel & Bos Architectuurbureau. “It became a relational practice involving architecture, urbanism, and even products,” explains Caroline Bos in a recent interview (Lovell, 2013). “The network practice is so pervasive, it makes you see that what you create within it is not the most important thing – it goes from the smallest to the largest scale. It is the relational aspect that is most important. The relational approach means that you use all the ingredients of architecture, structure, circulations system, the way the program is distributed in space and try to capture them in one gesture.”
Knowledge Platforms
As UNStudio developed its network thinking, in 2013 it launched the Knowledge Platforms, a concept that had been incubating for a few years within the kitchen of UNStudio without yet being formalized as part of the company process. The Knowledge Platforms have been created to facilitate knowledge sharing within the organization and with its global network. The Knowledge Platforms operate around four areas of knowledge (Sustainability, Materiality, Computation, and Organization) which are relative to the core business activities of UNStudio as a design firm and create for UNStudio an ecosystem for innovation, recruitment, and efficiency.
Fig. 3 - UNStudio's knowledge platform diagrams indicating categories and competence overlaps in their classification of four main areas of expertise (UNStudio, 2013)
The Knowledge Platforms function across the business units of the organization (known as clusters) and aim to create specialists within the practice by cultivating individuals’ affinities and knowledge for one or more of the specific four areas of focus. The Knowledge Platforms utilize two systems for knowledge sharing: the internal intranet and the external knowledge sharing platform called “MyPlatform.” The Knowledge Platforms, being organized cross-functionally, create a complementary support function to the business units, as they gather and distill already “produced” knowledge, and moreover as they manage to become catalysts for change or function as acquisition tooling for new projects or products.
Research methodology
The process methodology applied to this research has been based on a series of presentations and conversations in a group or in a one-to-one format with senior management of UNStudio as well as on industry research and literature.
The methodology of the research is rooted in the iterative process familiar to the design thinking and conveyed by a loop of ideation, measurement, and learning, or as defined in the Lean Start-up’s lexicon, a loop of Build, Measure, Learn. The sequence of conversation functioned as the iterative process and created a working methodology that would allow for feedback from UNStudio’s senior management and research supervision to create a learning curve in small steps and refine the target and inputs in a short amount of time.
The overall framework for the execution of the research has been based on three steps, three rounds of presentation and conversations with company and three iterative loops, reflecting these set of questions:
1. why? Why innovation? Why growing? What are fundamental ideas? 2. how? How do we grow? How is innovation leading growth?
STEP 1 – why?
DRIFT
As for the first conversations, it has been clear that in order to provide a clear assessment of the innovation initiatives, a more umbrella approach had to be researched, starting from the overall strategy of the company, its mission, and vision and the growth targets. UNStudio does not have a fixed mission or vision but works with a strategic policy which changes every two years as a directional compass for the organization. Currently, the strategic policy is called DRIFT.
DRIFT stands for Design, Relevance, Innovation, Future and Technology. These are the five keywords that characterize the policy plan and stand for the values that define everything UNStudio is and will be focusing on. The Policy Plan is an instrument to communicate a direction and to institutionalize it as part of a quality assurance manual. One of the strategic goals defined in DRIFT is to create and improve a system to better capitalize and structure UNStudio’s knowledge, which requires the Knowledge Platforms to behave more as a Profit Center than a Cost Center.
UNStudio aims to use knowledge sharing and its capitalization as instruments for growth, and the company, particularly senior management, is researching viable solutions that incorporate these tools into the its agenda.
A growth analysis
Growth for UNStudio has two main motivations: on one hand a growth rate is
necessary to maintain the status quo (not growing means recession, losing market share, talent drain, disinvesting), on the other hand the ambition and goals of the firm are to grow larger to be able to compete for jobs that only a larger organization can take on. This requires UNStudio to evaluate its rate of growth and make hypothesis based on its desired positioning.
The financial data on UNStudio’s performance (Fig below) presents a clear case in the development of the company. The analytical data of the last 10 years is aligned with the growth target objective for the next five years (21% growth rate, 35M in turnover by 2020). It is clear that the request from senior management is grow past the current situation (6% growth rate, 16M turnover) and a strategic change is required.
The data presented in the chart above shows that the performance of UNStudio prior the market crash of 2007-2009, referred as the housing bubble and credit crisis, shows a higher growth rate, 16%, than the one of the last five years, 6%. The global mechanisms of the real estate market have impacted companies around the world and created an unpredicted turbulence which, relatively (Glancey, 2009), UNStudio has been able to fence off. Market differentiation and a global presence have allowed the economic risks to be spread across the globe. The addition of new business lines such
Table 1 - Analysis of Financial Performance of UNStudio and target growth objective (UNStudio, 2016)
as products urban and interior (vertical integration) and geographical expansion (horizontal integration) have been the evident growth strategy so far.
The analysis that follows will take in consideration multiple approaches that are deemed interesting and feasible for UNStudio as an architectural and design firm. An analysis of the industry and its leap-froggers will set the base for the most obvious growth strategies, and further research on innovation will allow for synthesizing the hypothesis of growth. The relationship of innovation and an intrapreneurial culture is widely confirmed by research (Morris, Kuratko, and Covin, 2010), though the behavioral aspects that make intrapreneurship a counterpart of innovation will have to be seen through how innovation demands change.
The strategic options are:
- growth by vertical integration (either acquisitive or by expansion) - growth by horizontal integration (either acquisitive or by expansion) - growth by innovation
The financing of growth strategies is seen from UNStudio leadership to be organic and directly dependent on company profit, which sets a confined and clear boundary.
An analysis of the architectural industry - WA100
In order to comprehend the target growth, an analysis based on the data of the WA100, the world’s top 100 architectural firms, has been conducted. The analysis is a benchmarking exercise. Despite the limitations of benchmarking with an innovation mindset (Kaplan, 2005), the aim of this analysis is not to learn from the “best in the class” companies, but rather to set a background for how the industry is performing as whole. By choosing a specific set of parameters, it is possible to target the analysis as a smart benchmarking (Valdes-Perez, 2015), whereby the analysis will focus on the two financial KPIs given by the WA100 and on the most common growth strategies:
vertical and horizontal integrations.
WA100 (bdonline.co.uk, 2015) is an annual survey of the world’s biggest architecture practices and provides a list of the largest companies by size, based on the number
of fee-earning architects they employ and their relative gross turnover. The survey is not a comprehensive representation of the architectural industry as the architectural press is validly supporting (Quirk, 2013), but it is sufficient to give indications of those KPIs that allow for an estimation of the growth factors in the architectural sector. The WA100 was first published in 2011. As the data for the global top 100 firms has now been recorded for more than five years, it is possible to analyze a consistent pattern of growth data and changes in the industry based on revenues and company size. The globalization of the architectural sector provides greater transparency to an industry that still has a lot to mature in its managerial professionalization. The real estate industry is one of the least transparent sectors, hence its extreme efforts of (Gordon, 2006) to create more transparency, especially by making more data available on the internet. Concurrently, the architectural industry, perhaps due to its intimate relationship with the world of real estate, is also becoming more transparent.
In analyzing the WA100's data, a table of comparison (Appendix I) can be drawn to compare the values for the two growth KPIs (size and turnover) of the companies listed in 2016 with the values of 2015 to extract their growth rate values. The limitation of tracking only two years of operations is due to the fact that more than 40% of the list differentiates each year, not allowing for further continuity of the data set. The second set of data (Appendix II) is about the typologies of integrations, vertical integrations and horizontal integrations.
Vertical Integrations occur either as an expansion or as a merger and acquisition of
an additional business line, and are defined as upstream vertical integration when integrating a business that comes before architecture (real estate, urban planning, etc.), and downstream vertical integration when integrating any business that comes after the architecture (interior design, construction management, engineering, etc.).
Horizontal integration occurs by expanding the existing capacity of a business line
either by acquisition and merger or by expansion. As geographical expansion is a fairly common strategy for the majority of WA100 companies, it only rarely occurs as acquisitive, as financing is usually onerous and the notion of design (not only a cultural aspect) from the acquirer is difficult to transfer to the acquired company.
The financial data allows us to cluster the WA100 companies into four groups, as shown in the diagram below, based on the similarity of:
- the average growth rate, both in terms of people and turnover - the average income
Data shows that there is direct correlation between turnover and company size, with the exception of a few companies which operate exclusively in low-income geographical areas where turnover is extremely low compared to the firm’s size. The industry analysis shows fierce competition at the bottom of the curve and a large spread towards those companies which are at the top of the list. As growth rates seem to be lower at the bottom of the curve (2% average growth rate) and high among the industry leaders (8% average growth rate), the spread is set to increase even further. In order for UNStudio, currently classified in group 4 per turnover and company size as shown in the following two illustrations, to jump further on the list, its growth rate need to be way above the competition.
Table 2 - Four Groups of the WA100 per office people size
Based on further analysis of industry growth strategies that compares the quantities of vertical integrations, it is clear that the leading group has more integrations (Avg. 10.6) on an average than the lower group (Avg. 4.86), which drafts a clear conclusion: companies moving up the list offer more services than their competitors. It can also be deduced that horizontal integrations in the form of acquisition happens mainly on the top of the list, while horizontal integration per geographical expansion happens everywhere on the list. From the analysis on vertical integration, as the figure below shows, it is possible to deduct that the industry’s top tier group (group 1) is expanding its business everywhere on the integration scale (downstream and upstream), while the other groups (groups 2,3,4) have a polarization towards either an upstream vertical integration or a downstream vertical integration, displaying a clear logic to the application of vertical integrations.
To fully comprehend the vertical integration data set, a second list list of the competitors most often associated with UNStudio, has been compiled (table above) We must consider that most of these companies are not on the WA100. Most of UNStudio’s competitors are either too small (relative to the WA100's largest office) or not willing to share their data with the WA100. These competitors could be estimated to be in group 3 and group 4 of the WA analysis. The competitor list group is pretty homogeneous, with results skewed toward the vertical upstream integration group, which is consistent with the information deducted from the WA100.
Three companies result as diverging from the average in their strategic approach: - Shop Architects, as they heavily upstream integrated with a real estate division
and focus on the US market as only one geographical location.
- Snøhetta is perhaps the most vertically integrated company among the group and averages a line of services equal to the top tier group of the WA100 list .The group recently merged with a branding consultancy offering that now those consultancy services .
- BIG, because of their size and relative growth they are a leap-frogger.
Summarizing the input from the WA100 and the vertical integration analysis relative
to the position of UNStudio it appears clearly that:
- Vertical integration is a common approach in the architecture industry, and UNStudio is positioned in group 4, with its goal being to reach group 3 or even group 2 in terms of size and revenues. UNStudio can vertically integrate by extending new lines of business and by increasing from its current five to perhaps seven or more business lines. As groups 2, 3, and 4 are either downstream or upstream polarized, UNStudio should consider expansion as a choice. Considering that the competitors’ group is oriented mostly towards the upstream, it seems wise to focus on that side rather than on the downstream. This does not mean UNStudio should not also expand downstream, but should create a balance that skews towards a consistent upstream brand image, incorporating more consultancies and design services rather than construction management and engineering services.
- Horizontal integration, geographically expanding is about the status quo, only a limited amount of companies does not have multiple locations. Group 1 companies have as many as 40 – 50 locations (Gensler has 46 offices around the globe). Companies that are not expanding geographically are mostly downstream integrated as they focus on a specific market, as the Middle East, China, India (or Belgium for Jaspers & Eyers of Group 3) and they expand towards the construction industry, focusing on exploiting commission to the hand delivery.
- Acquisitive growth carries lots of obstacles for upstream vertically integrated companies (leadership affinity, hiring senior management, etc); this makes acquisitive growth the least probable strategy for UNStudio, but does not exclude it; Snohetta, one of UNStudio’s competitor and a strong Scandinavian design firm, has been acquiring/merging with a branding consultancy company to extend their services.
These analyses describe some very well-known growth strategies: integrating new business lines, expanding, acquiring or merging with new companies, and going overseas to open up to new locations and markets. Due to the fact that the world economy is much more globalized and the internet renders a borderless geography (among many other factors), recent literature has been naming innovation as the main driver for company growth, and binding it to an almost essential component of entrepreneurship, which within a company we called intrapreneurship.
The Ten Types of Innovation
The list of competitors has highlighted a leap-frogger, BIG, whose growth has been substantially higher than the rest of its group. BIG, Bjarke Ingels Group, a Danish company, is fairly vertically integrated in line with its group average, and horizontally integrated with multiple geographical locations. Despite its totally normal (point of parity) integration strategy, its growth is higher than its group competitors. According to data, it has been growing at a 12% rate, which is almost double the best companies in same group (WA100 Group 4, which includes UNStudio). To evaluate why this company has been so successful in innovation, their business model has been analyzed via the ten types of innovations framework (Keeley et al., 2013), shown in the figure below.
Analyzing the company, a set of multiple innovation types have been highlighted:
- Structure - The company has adopted an entirely different organization model. Their new model is a hybrid of a partnership structure, often adopted by architectural firms and other firms lead by professionals such as lawyers, and a generic company structure with a fully fledged C-suite. The two types of organizations coexist and do not overlap, which positions the company in a relative innovative group for its size and group. Similar structures are also seen in the group 1 organizations.
- Process - The unique type of product comes with a very cost efficient methodology for product development. Based on simplification and reduction of the complexity in the design process, they could reduce operational costs to maximize results.
- Product Performance - the product delivered by BIG is a unique type of offering, and the company develops designs without precedents (e.g. “courtscraper” (Winston, 2016)).
- Brand – Their strong company culture focused on building a brand that differentiates from the previous generation of architects by focusing on a transformational model. This model embraces the star architect philosophy and at same time creates a brand image similar to a creative, productive company with all the excitement and characteristics of a Silicon Valley company (Winston, 2016).
- Customer Engagement - The company is well-known for its social media channels, which it uses to engage their customers.
This analysis conveys information from data available from articles, not entirely covering the complete spectrum of the Ten Types of Innovation model, as data about services, profit model and customer engagement is not available. However, the data still depicts a highly innovative company, with at least 5 types of innovation.
An analysis of UNStudio through the Ten Types of Innovation
In relation to the Ten Types of Innovation frameworks, a scan of UNStudio in conversation with senior management highlights UNStudio's current dimension and the dimensions UNStudio aspires to reach. The current types of innovation within UNStudio, highlighted in the figure below, refer to their product performance and
brand.
The product developed is unique and original and has differentiated UNStudio since the company's beginning. The uniqueness of the conceptual approach, the tooling, and the hybrid combinations have helped UNStudio build a unique and recognizable brand, which blends academic and commercial intelligence. The strength of UNStudio’s brand can be seen in the unique expression of their designs, such as with the Erasmus Bridge in Rotterdam, where the bridge itself has become a symbol for the city of Rotterdam and even acquired a name of its own: the “Swan of Rotterdam”. According to research (Keely et al., 2013), the number of types of innovation at top companies is correlated to the performance of the company. Analyses from various sources including Doblin, MIT, Forbes, and FastCompany shows that top performers focus on multiple types of innovation (more than 5) and outperform even the S&P500 (as the graph below shows in relation to stock price). The research also emphasizes that top innovators focus beyond the product performance and integrate twice as many types of innovations.
Six key principles are suggested on how to operate the Ten Types of Innovation framework:
1. Understand all ten types;
2. De-emphasize reliance on product and technology; 3. Think about categories as well as types;
4. Use the types that matter most;
5. Understand what your users really need; 6. Use enough of the types to make a splash.
A conversation with senior management focused on a set of the most important innovations that would best suited to UNStudio as a design firm, displayed in the figure below.
Table 6 - How stock prices correlated with the types of innovation they drove internally (Keely et al., 2013)
The Knowledge Platforms have put emphasis on product system innovation, especially on products emerging as a byproduct from architectural project, rather than as commissioned products. If the process would be sufficiently strategized and coded into UNStudio process, it could constitute an additional innovation strategy. The same process can be transformed into a profit model innovation by capitalizing on the royalties or fees required to design the products as byproducts of architectural projects. The innovation occurs when this situation is an integral part of the business model of project making and not as a sporadic consequence. The third element of innovation, considered important in the eyes of the senior management, is the
channel experience. The channel experience includes enhancing the brand's
communication to customers through the smart use of different social media platforms and other channels. It is not unusual that clients find UNStudio via the internet, through the main website or online publications, therefore enhancing the marketing and channel experience of those potential new customers via social media, conferences or events will create a greater opportunity for new customers to engage with the brand more often. To be valid, UNStudio's execution of this strategic operation needs to be more innovative than any of its competitors.
This first set of innovations, once in place, will trigger other innovations. A system to agree on the changes required to set new innovations in place will exist, and the process of taking the first set of innovations to the next set is rather small. The diagram below shows the types of innovation that complement those already discussed.
Fig. 7 - the ten types of innovation, UNStudio ambitions types on the bottom, existing innovations on the top
As product offerings and profit model change they require an emphasis on operations, and therefore smart ways of introducing products to the market and developing them with manufacturing companies. This is where the Network component plays a strong role. This type of innovation creates internal pressure for organizational alignment of talents and assets, in order to attract and retain the best talent, develop the innovation of a new team, and spread new culture. Systematizing the process efficiency requires a constant redefinition of the organization to support innovation, requiring Structure Innovation. Moreover, as the form of a channel experience improves, a sensitivity for
customer engagement could emerge to make the customer experience more
memorable, offering opportunities to innovate on those aspects as well.
Summarizing: A growth strategy based on innovation, from the perspective of the
Ten Types of Innovation framework, suggests (in line with the goals of senior management) utilizing and focusing on a strategy that can enhance the value of the current knowledge developed within UNStudio. This can be achieved by extending the product offer and expanding operational thinking with a more developed marketing and operational structure. The assessment also suggests, in order for innovation to be effective, UNStudio should consider more than two types of innovation. These changes are to be seen through the applications of the next framework and in the final strategy assessment.
An analysis of UNStudio Business Units
Further analysis, in order to set a strategy recommendation, has lead to the analysis of UNStudio's business units, how they relate to each other, and how a growth strategy of integration (horizontal, vertical) could function within the company. The second important factor is the relation of the business units to the innovation initiatives and how could these last one foster growth.
By analyzing business units, both current and future, we could (in conversation with senior management and the heads of units) highlight their current status and growth ambition. The analysis has been carried on with two frameworks that have been previously introduced. Here they are explained in detail and applied to UNStudio:
- The Three Horizons Framework (Baghai, Coley, and White, 2000) - The Four Zones Framework (Moore, 2016)
The two models are complementary, as the second one builds on the first one.
Three Horizons Framework
The Three Horizons Framework, as in the figure below, illustrates the initiatives of an organization in relation to their ROI time and their profit, classifying them into three horizons:
- Horizon 1 initiatives are those that represent the core line of a company business. They focus on superior execution and they are what a company does better than any other company, and this is where incremental innovation occurs;
- Horizon 2 initiatives are those initiatives that generate value by positional advantage, taking advantage of new opportunities and gaining market share compared to their competitors;
- Horizon 3 initiatives are initiatives that the company believes will have potential, where the value is insight and foresight. Experience and research shows that Horizon 3 initiatives require more constant senior management attention than expected because, during the battle for resources, they are often more likely to be penalized or shut down, thus depleting any potential future.
Horizon 3 initiatives therefore need to be defended by very senior leadership; Horizon 3 initiatives are where disruptive innovation occurs.
The three horizons differ for the individual metrics of analysis and performance, and for the qualities of the management that lead those initiatives:
- Horizon 1 initiatives are performance based, where the financial indicators are profit, return on invested capital, and cash flow, and they tend to have experienced business managers and processes that are more traditionally about performance and efficiency;
- Horizon 2 is a more entrepreneurial environment, where metrics are revenues and net present value and the leading group is business builders. Process needs to be more flexible and focused on milestones;
- Horizon 3 has the ambition to create new businesses, where the metrics are exclusively milestones based and market oriented, the leading managerial
group is constituted by champions and visionary people and the processes are very often guided by very senior leadership.
The following timeline refers to the impact and success of the initiatives in terms of generating cash flow. Horizon 1 initiatives are generating cash flow today, Horizon 2 initiatives are anticipated to generate cash flow within 1 to 3 years, and Horizon 3 initiatives have a timeframe of 3 to 5 years.
As far as the current status of the business lines of UNStudio, the graph below shows that there are a number of initiatives in Horizon 3 and in Horizon 1 and nothing in Horizon 2.
The Horizon 1 initiatives are, within UNStudio, the architecture business lines, distinguished per geographical region, while the Horizon 3 initiatives include the
potential new geographical areas and the other units and lines of business that UNStudio is betting on.
UNStudio is currently missing Horizon 2 initiatives. Those require commitment from the organization, in terms of financing, and from the leadership to mature. The timeframe for Horizon 2 Initiatives to reach Horizon 1 is to about 2 years.
Architecture, Asia in fact has been developed through a Horizon 2 stage where a sufficient dose of funding allowed for the initiative to mature along with senior leadership support and a business building leadership that was able to bring the initiative from the transitional zone of Horizon 2 to Horizon 1.
The Three Horizon Model serves as a good analytical tool for the major business lines, but it does not fully take into consideration other essential initiatives of the firm, such as the support initiatives or other initiatives and Cost Centers such as Finance, IT, Marketing, R&D, and, in UNStudio’s case, the Knowledge Platforms.
The Four Zones framework
A further investigation of the business units of UNStudio is carried out by exploring the Four Zones framework (Moore, 2016), whose diagrammatic representation is displayed in the figure below and which builds on the Three Horizon model.
The Four Zones model is a strategic framework to effectively guide the change in initiatives between those that are potentially disruptive and those that are sustaining innovation. The differences among the zones are in terms of investment horizons, performance metrics and operating cadence. Each zone necessitates a playbook, while at the same time a total strategic playbook, that overarches all four zones, needs to be in place. For disruptors it is defined as zone offense, for disruptees as zone defense. The Four Zones are: the Performance Zone, the Productivity Zone, the Incubation Zone, and the Transformation Zone.
The Performance Zone is the source of 90% of revenue and constitutes almost 100% of the profit. The initiatives in the Performance Zone are Horizon 1 Initiatives. Operations have a clear setup, and a responsibility is defined with clear process owners and a strong commitment to discipline. As the offense playbook is followed, the pressure comes from bringing new initiatives from the Transformation zone into the Performance Zone. A recurrening mistake is to not choose or not prioritize which initiative to push through the Transformation Zone. This is a priority because the Transformation Zone has a limited time (resources are not infinite), and transformation
is a temporary undertaking. The second top priority, in the Performance Zone, is “making the numbers”. As the defense playbook is played, three principles guide the strategy and focus the R&D on neutralization rather than on differentiation, and ultimately place every incubation technology or asset in support of the main business lines.
The Productivity Zone is home to the services that are defined as enablers for a company, such as finance, marketing, supply chain, manufacturing, and so on, (ultimately, any function that does not have a direct accountability in the revenue). The focus of this Zone is on sustaining innovation, and managing tensions in compliance, efficiency and effectiveness. Here the initiatives are Horizon 1.
The Incubation Zone is where companies position themselves to catch the next big wave. This is where the Horizon 3 initiatives are taking place and where any significant return on investment is several years away and revenues are no more than 1% or 2% of the enterprise’s total. Substantial difference is made when playing offense or defense. In offense, the game plays one (and only one) initiative towards Horizon 2/Transformation Zone, meanwhile all other businesses in incubation have to be repositioned, knowing that resources will be blocked for a few years while the selected initiative goes through the Transformation Zone. In contrast, by playing defense, all focus goes to the Performance Zone, and any new technology or asset in the Incubation Zone that can immediately help or improve or revitalize the Performance Zone’s initiatives is diverted to those initiatives. In the age of disruption a new playbook is necessary as the conditions and speed of the outside world are drastic and everything can revert in a short time.
The Transformation Zone is where a business model scales to material size. Transformation is primarily a tool for offense playing and the goal is to rapidly scale a business or a new line of business that at least can constitute 10% of the total revenue. There are many challenges in this Zone, and for most the internal and external pressures will set against the initiative until the tipping point is crossed. Playing defense, the transformation initiative means to downgrade a business line and to
reengineer it. The Transformation Zone has the timeframes and constituents of Horizon 2 initiatives, entailing inevitably a J-curve, and very often creates huge change-management issues that must be handled with the greatest amount of creativity.
As the input from the frameworks are defined, it is now possible to analyze the business units of UNStudio and point out where its innovation initiatives are located.
The graph below shows, in accordance with the Three Horizon Framework, that two initiatives, Architecture, Amsterdam, and Architecture, Asia are in the Performance Zone, meanwhile several initiatives are in the Incubation Zone, such as new geographical location initiatives and business lines (interior, product and urban). The Knowledge Platforms are currently positioned in the Productivity Zone, as they perform a support activity to the other lines of business, injecting either novelty in the architecture or in the other incubating initiatives or supplying material to the PR team for the webpage of UNStudio. Along with the Knowledge Platforms, the other initiatives that are located in the Productivity Zone are: Finance, IT, Public Relations/Business Development and Human Resources. At the moment, looking onto the next big wave rises many doubts and questions on which initiative should be moved ahead and which should not.
From the innovation initiative point of view, the long running request of senior management is to create an opportunity for the innovation initiative to become an incubating initiative of its own, although despite that belief a concrete plan of action has not yet been constructed. The other running initiatives in the Incubation Zone have substantial pressure to perform while they are still in Incubation. Only the geographical initiatives developed and strategized by management have the ability to sustain the request from senior management. Among the challenges that emerge from the current situation are a lack of prioritization and the lack of a system to allow innovation. As the Knowledge Platforms have not yet become an innovation initiative, they have not defined a street for new innovation initiatives like WorkFields to become part of the operations of UNStudio. This is why in the diagram above the WorkFields icon sits outside the graph.
Implications/Managerial Recommendations
Step 2 - How ?
As senior management opts for organic growth, by utilizing the company's profit as source of investment for new ventures, there is simply a limited space of growth where not all initiatives can be moved into the Transformation Zone. Research (Moore, 2016) suggests that only one initiative at a time can be brought into Transformation Zone, so it is essential to evaluate the potential of each initiative in the Incubation Zone during the selection process. Prioritize is the fundamental recommendation at this stage, before engaging with a set of specific considerations about the innovation initiatives and how they could operate within the overarching strategy of UNStudio. As strategies are brought forward to their execution, a set of considerations should be undertaken to set them up for success.
Research (Hrebiniak, 2006) shows that 50% to 90% of strategies fail at their execution as they face obstacles that derail them from the undertaken intents. After consultation with senior management, here follows a list of the top three obstacles for UNStudio:
- Poor or vague strategy;
- Inability to manage change effectively and overcome resistance to change; - Not having guidelines or a model to guide strategy implementation efforts.
As a strategy is defined in the next paragraphs, these three obstacles are taken in consideration. Using frameworks we will be able to devise a clear strategy and discuss change to define guidelines for a more actionable plan.
The New Business Unit Strategy
A strategy of offense has been considered the best strategy for UNStudio. Defense means to not further invest in new initiatives, and assumes that the current initiatives in the Performance Zone are either outdated or they do not perform to their targets, which is not UNStudio’s case. A plan for the strategy has been therefore suggested as a rotating mechanism of initiative from incubation to transformation to performance, creating an ecosystem that plays according to the strategy book and starts with the essential step of prioritization, as resources are limited.
The first step in playing offense, as shown in the figure above as move 1, is the results of a few trials and discussions with senior management, while evaluating the possibilities of each initiative. The conclusive first step includes selecting among two of the units to be brought into the Transformation Zone, while the incubating Architecture geographical initiatives could be directly moved into the Performance
Zone upon selection. Both Product and Urban Units are in the Incubation Zone, their teams are creative and visionary and they have shown extremely good potential for their units to be brought forward as a self-standing business that can produce enough revenue for the company. In order for them to advance further they need to be brought into the the Transformation Zone, where a change of gear is required for them to succeed, but a selection is required due to the limited resources and attention needed to transform them into a business. The Transformation Zone brings an organization change to the unit as that unit becomes the owner of the new business line, and sufficient investment has to be made to feed the business through the transformation until the unit can reach about 10% of the total revenue of the company in a timeframe between 12 and 30 months. The geographical units can be transformed directly to Horizon 1 from Horizon 3 because of the vast experience in the specific business line, architecture, and an existing senior management team. Limitations to the geographical initiatives are mostly related to the liability of foreignness and the particular geographical stability of the new market. The third step of this first move into the strategy is to capitalize and invest small by incubating the innovation initiatives, the Knowledge Platforms and the WorkfFelds. The recommendation to focus and
integrate them comes from the limited capacities of both the financial resources and
the required leadership attention to support the initiatives and set them up for success. The innovation initiatives can be seen both as an incubation of business ideas (Incubation Zone – Horizon 3) but at the same time as a support initiative (Productivity Zone – Horizon 1). The important line of action is to create an umbrella for both that merges them into a single system, allowing for expansion as new ideas come into play and create a system to evaluate the effectiveness of the initiative to select and reward the positive results and discard the undesired ones. In the following chapter, a deeper focus on these will create more clarity on this choice.
As the selection on the first move is made, the strategy for the next 12 to 30 months could look like the figure below, whereby Product is select for Horizon 2 and Architecture, USA is selected for Horizon 1. The rest goes back into incubation and the Knowledge Platforms and WorkFields as innovation initiatives become go into the Incubation Zone and the Productivity Zone as a support initiative.
